The CIPD’s latest Labour Market Outlook (LMO) found that median basic pay rises of just 1.2 per cent are expected in the 12 months to December 2016.

The CIPD said that low pay growth can be attributed to the rise in employment levels.

More than 1,000 businesses were polled for the study and 17 per cent cited the introduction of auto-enrolment, along with other HR costs had helped to limit the amount they could pay growth to less than two per cent.

Speaking about the findings, Gerwyn Davies, labour market analyst at the CIPD said: “The feedback we’re seeing from employers suggests that official forecasts for wage inflation for 2016 are too optimistic.

“A significant proportion of employers have already reported increases in employment costs as reasons why they have limited pay rises in the last 12 months to two per cent or less – and looking ahead these cost pressures will only increase. With inflation expected to remain low during 2016 and labour supply remaining strong, we shouldn’t be surprised to see pay expectations staying low.”

Furthermore, a rising proportion of organisations, from six to 13 per cent, told the survey they don’t feel compelled to match or raise their previous pay awards.

In addition, 14 per cent of employers said that increases to the national minimum wage were highlighted as a cause of limited pay growth.

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